Citation Nr: 0614918
Decision Date: 05/22/06 Archive Date: 08/22/06
DOCKET NO. 02-20 140A ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Nashville,
Tennessee
THE ISSUE
Entitlement to payment of attorney fees from past-due
benefits.
REPRESENTATION
Appellant represented by: Disabled American Veterans
WITNESS AT HEARING ON APPEAL
The veteran
ATTORNEY FOR THE BOARD
Raymond F. Ferner, Counsel
INTRODUCTION
This matter comes before the Board of Veterans' Appeals (BVA
or Board) on appeal from a decision of the Department of
Veterans Affairs (VA) Regional Office (RO) in Nashville,
Tennessee, that determined that the veteran's former attorney
was entitled to payment of attorney fees and withheld
20 percent of the veteran's past-due benefits for possible
payment of attorney fees. The veteran, who had active
service from January 1973 to May 1977 and from October 1977
to March 1979, appealed that decision to the BVA, and the
case was referred to the Board for appellate review. In July
2004, the Board returned the case to the RO for additional
development. Following completion of the requested
development, the case was returned to the Board for further
review.
FINDINGS OF FACT
1. All relevant evidence necessary for an equitable
disposition of this matter has been obtained.
2. The fee agreement between the veteran and his former
attorney meets the basic statutory and regulatory
requirements for payment of attorney fees from past-due
benefits.
3. A BVA decision dated in October 2001 resulted in the
veteran being awarded past-due benefits from February 8,
1991, and the RO withheld from those past-due benefits an
amount calculated at $42,857.80 as representing the maximum
attorney fees payable.
4. The RO received a statement from the veteran in March
2001 indicating that he had terminated his attorney's
employment shortly following the BVA hearing scheduled for
February 1, 2001.
5. Under the facts and circumstances of this case, attorney
fees calculated in the amount of $42,857.80 are reasonable.
CONCLUSION OF LAW
The requirements for payment of attorney fees in the amount
of twenty percent of past-due benefits payable to the veteran
calculated in the amount of $42,857.80 have been met.
38 U.S.C.A. § 5904 (West 2002); 38 C.F.R. § 20.609 (2005).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
The basic facts in this case are not in dispute. In June
1991 the veteran filed a claim for an increased evaluation
for his service-connected psychiatric disorder. A rating
decision dated in January 1992 increased the evaluation for
that disability from noncompensable to 10 percent from
February 8, 1991, with the date of a VA outpatient treatment
record apparently being construed as an informal claim for an
increased evaluation. The veteran expressed disagreement
with that decision and initiated an appeal to the BVA. In
July 1995, the Board returned the case to the RO for
additional development, and following accomplishment of the
requested development, a July 1997 rating decision increased
the evaluation for the veteran's psychiatric disorder to
30 percent, also effective from February 8, 1991. The
veteran continued his dissatisfaction with the RO's decision,
and the case was returned to the Board for further appellate
review. In a decision dated in December 1997, the Board
affirmed the RO's decision to assign a 30 percent evaluation
for the veteran's bipolar disorder.
In July 1998, the veteran and his attorney entered into a
contingent fee contract for the purpose of appealing the
Board's decision to the United States Court of Appeals for
Veterans Claims (Court). At this point, the Board notes that
the attorney fee contract signed by the veteran and his
former attorney satisfied the basic statutory and regulatory
requirements set forth in 38 U.S.C.A. § 5904(d) and 38 C.F.R.
§ 20.609(c). Specifically, a final decision had been
promulgated by the Board with respect to the issue involved
and the attorney was retained not later than one year
following the date of the Board's decision. That agreement
also provided that a fee equal to 20 percent of the total
amount of any past-due benefits were to be withheld by the VA
and paid directly to the attorney.
Proceedings before the Court included filing of a Joint
Motion for Remand. In that Joint Motion, the basis for the
remand was that the veteran had not been afforded a personal
hearing as he had requested. That basis appears to be the
primary reason for the Joint Motion, although the Board
acknowledges that the motion indicated that there were
private medical records that had not been obtained despite
the veteran's failure to respond to the RO's October 1995
letter requesting the complete mailing address for each of
the medical care providers. The Court granted that Joint
Motion in February 1999. The veteran's former attorney then
filed an application for Equal Access to Justice Act (EAJA)
fees and provided the Court with an itemized listing of
services provided between July 1998 up to and including the
time expended for preparation of the EAJA application. The
veteran's former attorney claimed total fees and expenses in
the amount of $3,435, which the Court granted in March 1999.
In July 1999 the Board returned the case to the RO for
accomplishment of the development requested by the Joint
Motion for Remand. After accumulating additional evidence, a
rating decision dated in December 2000 increased the
evaluation for the veteran's psychiatric disorder from
30 percent to 50 percent, effective August 31, 2000. A
letter from the RO to the veteran and his former attorney
indicated that the total amount of past-due benefits
resulting from that award had been computed as $1,270.10 and
that 20 percent of that amount, $254.02, represented the
maximum fee payable by the VA from past-due benefits.
Evidence of record indicates that the veteran's former
attorney was paid $254.02 and that fee is not at issue in
this matter and the veteran does not dispute his former
attorney's entitlement to that sum.
The veteran was then scheduled for a hearing before the BVA
at the RO on February 1, 2001. At that hearing the Member of
the Board acknowledged that the veteran had been represented
by his former attorney but that he was unrepresented at the
hearing. When the veteran was asked whether he chose to
represent himself at the hearing, he stated that he did not
feel that he had any other option. At that point the Member
of the Board informed the veteran of other representational
options, but the veteran responded that he had checked with
two service organizations who both informed him that they
would not get involved as long as an attorney was
representing him. When asked whether the veteran desired to
keep his former attorney as his representative he stated that
he did not have much of a choice and indicated that an
agreement had been signed. When the veteran was asked
whether it was his intention to release the former attorney
as his representative the veteran stated that he did not
think he could if he wanted to release the attorney.
Following that hearing, the veteran sent a letter to the RO
in March 2001 in which he formally notified the RO that
effective February 5, 2001, he released his attorney. That
letter also documented what the veteran perceived as
shortcomings in his former attorney's representation in his
claim.
The veteran's file was then transferred to the BVA, and in a
decision dated in October 2001, the Board increased the
evaluation for the veteran's bipolar disorder to 100 percent.
In a rating decision dated in November 2001 the RO
effectuated the Board's decision and assigned a 100 percent
evaluation from February 8, 1991. In letters to the veteran
and his former attorney informing them of the decision for
increased compensation benefits, it was noted that 20 percent
of past-due benefits calculated in the amount of $43,580.28
had been withheld as representing the maximum attorney fee
payable from those past-due benefits. In February 2002, the
veteran submitted a Notice of Disagreement in which he
questioned the reasonableness of the attorney fees. The RO
issued a Statement of the Case, after which the veteran filed
a Substantive Appeal. The veteran then appeared at a hearing
before the BVA in Washington, D.C., in September 2000.
At the BVA hearing the veteran testified that he had been
dissatisfied with his former attorney's representation prior
to the date of his February 2001 BVA hearing, but was unaware
that he could terminate his former attorney's employment at
any time until he checked with another attorney locally. The
veteran also indicated that he had spoken with his attorney
on the morning of the hearing and that his attorney advised
him against attending the hearing and when asked whether the
veteran's former attorney provided a reason as to why the
veteran should not attend the hearing, the veteran answered
in the negative.
Thereafter, the Board returned the case to the RO and
requested the attorney provide an itemized statement
concerning the time spent and the nature of the work
performed in connection with his employment with the veteran,
and specifically advised the former attorney that a statement
of services provided on behalf of the veteran between July 1,
1998, and February 11, 1999, was of record and that the
statement requested should reflect service provided on behalf
of the veteran between February 12, 1999, and February 2001,
the date the veteran terminated the attorney's employment.
Both parties were afforded an opportunity to submit any
additional evidence and/or argument they desired to have
considered in connection with this matter.
In October 2004 the veteran's former attorney submitted a
memorandum in support of recovery of the 20 percent
contingency fee. In that memorandum the veteran's former
attorney asserted that he was entitled to the total amount of
the 20 percent contingency fee since the veteran had not
rebutted the presumption of the reasonableness of the fee.
In support of that proposition the former attorney cited the
Court cases of In Re Mason, 13 Vet. App. 79 (1999) and In the
Matter of Vernon, 8 Vet. App. 497 (1996). The former
attorney also cited the exception in Scates v. Principi,
282 F.3d 1362 (Fed. Cir. 2002) for the proposition that if
the former counsel is not entitled to the full amount of the
contingency fee as a matter of law, that he should be
entitled to most, if not all of the 20 percent contingency
fee.
After the initial decision regarding the withholding of past-
due benefits calculated in the amount of $43,580.20, an
adjustment was made after the veteran pointed out that the
amount withheld should not include the amount between the
date of the BVA decision and the date of the rating decision.
Consequently, an adjustment was made and it appears that the
amount set forth in the Board's July 2004 REMAND, $42,857.80,
represents the amount of past-due benefits now withheld by
the RO as representing the maximum amount of attorney fees
being withheld pending a decision.
At the outset of the Board's analysis it is acknowledged that
the 20 percent contingency fee provided by the attorney fee
contract in this case is presumed reasonable. 38 C.F.R.
§ 20.609(f). The veteran essentially contends that the
former attorney should be found to be entitled to this fee
with respect to only a portion of his past-due benefits based
on his dissatisfaction with his former attorney's
representation of him and based on what he perceived as the
attorney's limited effort on his part. It is not disputed by
either party, and is in fact documented, that the former
attorney in this case did continue to represent the veteran
subsequent to the Court's remand. Further, from a review of
all of the evidence of record, the Board finds that although
the former attorney did not expend a significant amount of
time on this veteran's case following the Court's remand, the
amount of actual time expended by the former attorney is not
dispositive of this case as it is clear the former attorney
did continue to actively represent the veteran at least
through part of 2001.
The Board notes that in Scates v. West, 13 Vet. App. 98
(1999), the veteran's former attorney sought payment of
attorney fees from past-due benefits after his representation
was terminated by the veteran. A panel of the Court noted
that the fee agreement in question provided for New York law
to control the remedies available to the attorney. Id. at
104. After reviewing New York law, the Court held that the
veteran's former attorney was not entitled to payment of
attorney fees from past-due benefits because the contingent
fee contract between the veteran and the attorney ceased to
exist when the veteran terminated the attorney client
relationship. Id.
Subsequently, the attorney obtained review by the full Court
and withdrawal of the panel decision. See Scates v. West, 13
Vet. App. 304 (2000). The en banc Court decision held that
all issues involving entitlement or eligibility for attorney
fees under direct-payment contingency-fee agreements, as
contrasted with the issues of reasonableness and
excessiveness, must first be addressed by the RO. Scates v.
Gober, 14 Vet. App. 62, 64 (2000).
On further appeal, the U.S. Court of Appeals for the Federal
Circuit (Federal Circuit) concluded that, when read in
context and in the light of the statutory provisions
governing the payment of attorney fees in veterans benefits
cases, implicit in a contingency fee arrangement was the
understanding that the attorney's right to receive the full
twenty percent of past due benefits would arise only if he
continued as the claimant's attorney until the case was
successfully completed. Scates v. Principi, 282 F.3d 1362,
1365 (Fed. Cir. 2002). Thus, the Federal Circuit held that
an attorney with a contingent fee contract for payment of
twenty percent of accrued veterans benefits awarded,
discharged by the client before the case is completed, is not
automatically entitled to the full twenty percent fee. He
may receive only a fee that fairly and accurately reflects
his contribution to and responsibility for the benefits
awarded. Id. at 1366. The remaining question was which part
of VA should determine the fee payable to the attorney, the
RO or the Board. Id. The Federal Circuit did not reach the
jurisdiction issue but rather concluded that the Court's
decision may be sustained on alternate grounds, i.e., that on
the particular facts of the case, the RO was the most
appropriate agency initially to decide the attorney fee claim
because it was better qualified than the Board to resolve the
kind of factual inquiries involved. Id. at 1368. Those
inquiries included why the veteran terminated the attorney's
employment, on what basis should the attorney's share of the
20 percent contingent fee be calculated, and what effect did
state law have on the contingent fee agreement. Id. at 1368-
69.
The Board notes however, that in Scates, the contingency fee
itself stated that state law controlled the attorney's
available remedies. There is no such provision in the
contract at issue here. Thus, the Board must determine why
the veteran terminated the former attorney's employment, and
on what basis should the attorney's share of the 20 percent
contingent fee be calculated. As noted above, the former
attorney may receive only a fee that fairly and accurately
reflects his contribution to and responsibility for the
benefits awarded.
The Board notes that the July 1998 attorney fee agreement
provided that the veteran could discharge his attorney at any
time, but that the veteran's right to discharge attorney must
be made in good faith, and by good faith it was specified
that the veteran must entertain a reasonably objective belief
in the attorney's inadequate representation. The veteran
essentially contends that his discharge of the former
attorney was made in good faith and that he had a reasonably
objective belief that the attorney's representation was
inadequate.
One of the reasons the Court vacated and remanded the Board's
decision in this case was based on the former attorney's
representation to the Court that the veteran had not been
provided a hearing. Indeed, the veteran had requested a
hearing which he had not been afforded, and continued to
desire a hearing following the Court's remand. After the
case was returned to the RO from the Board, a hearing was
scheduled as specifically requested by the veteran's attorney
at the Court. However, the veteran testified under oath that
on the day of the hearing he spoke with his attorney who
advised him not to attend the hearing. The veteran indicated
that his former attorney did not provide a reason for his
recommendation that he not attend the hearing. Thus, the
veteran asserts that the advice provided by his former
attorney not to attend the scheduled Board hearing was
contrary to the position taken before the Court and contrary
to his desire to attend the Board hearing.
Further, the veteran indicated that he was dissatisfied with
the communication difficulties with the former attorney
during the pendency of his prior appeal. He has submitted a
copy of a letter dated in January 2001 from the former
attorney to the veteran indicating that his office had been
unable to contact the veteran by telephone and requesting
that the attorney contact their office. The veteran,
however, has stated the he did apprise the former attorney of
his new work number, and that his home telephone number had
remained the same since 1997. The attorney has not
specifically addressed these contentions.
The veteran also asserts that given the amount of work
expended by the former attorney and the level of expertise
demonstrated, the fee in this case is unreasonable.
The Board has considered the stated reasons why the veteran
terminated the former attorney's employment, and finds that
the record does not demonstrate that the terms of the fee
agreement should not be enforced based on its stated terms.
As noted above, "good faith" as set forth in the fee
agreement means that veteran must entertain "a reasonably
objective belief in the attorney's inadequate
representation". The question before the Board is not
whether the veteran could discharge the attorney, but rather
to what extent should the terms of the fee agreement be
enforced.
The veteran has stated that the former attorney advised that
he not appear for the Board hearing despite the attorney's
request for such a hearing at the Court. However, the Board
notes that the attorney's efforts successfully resulted in a
vacate of the Board's prior denial and remand by the Court.
The former attorney also continued to represent the veteran
and had documented contact with the RO and the veteran
subsequent to the Court remand. While the Board acknowledges
the veteran's contentions regarding the advice provided
regarding the Board hearing, a reasonable person may conclude
that the attorney's advice had simply changed between the
time the Joint Motion was filed and the time of the hearing,
and not that inadequate representation was involved such that
the full terms of the fee agreement should not be enforced.
The veteran has also stated that he had difficulties in
communication with the former attorney as outlined in a
letter dated in March 2001. However, given that the former
attorney and the veteran reside in different states, this is
conceivable and in fact, there is some documentation of this
difficulty. It is clear that there was, however, ongoing
communication between the veteran and the former attorney
throughout the years of the appeal process.
Finally, the Board finds that the record clearly demonstrates
a reasonable amount of time expended by the former attorney
on the veteran's claim over the course of several years, and
the former attorney has documented his level of expertise in
veterans law.
Thus, the Board finds that the stated reasons for terminating
the former attorney's services are not consistent with the
terms of the fee agreement and that the fee agreement should
be enforced on its terms.
The Board must next determine on what basis should the
attorney's share of the 20 percent contingent fee be
calculated. As noted above, the veteran did attend the Board
hearing in February 2001, and following that hearing, the
case was returned to the Board. The veteran testified at the
most recent Board hearing that he discharged the former
attorney by telephone on February 5, 2001. However, VA did
not receive notice that the veteran discharged the former
attorney until March 2001. By Board decision dated in
October 2001, a 100 percent evaluation was assigned the
disability in question. A review of that decision does not
reflect that the grant was based necessarily on the testimony
provided by the veteran at that hearing. In that decision,
the Board found that: "[t]he most recent evidence, however,
especially the August 2000 VA examination report, tends to
support a conclusion that the veteran's adverse
symptomatology now renders him unable to maintain
employment....Given clinical assessments recently made, the
most recent GAF score, and the increasing problems
experienced by the veteran, the Board finds that the evidence
regarding the claim for an increased rating is at least in
relative equipoise." Thus, it appears that the basis for
the Board grant was the cumulative evidence of record and
particularly that obtained through the efforts of the former
attorney, following the Court's remand and prior to the time
that the veteran terminated the former attorney's services
after having been represented by him for three years.
Indeed, such evidence was obtained even prior to the 2001
Board hearing.
Consequently, under the facts and circumstances of this case,
the Board finds a reasonable fee for the veteran's former
attorney represents 20 percent of past-due benefits awarded
the veteran in the amount of $42,857.80. The Board finds
that the fee fairly and accurately reflects the former
attorney's contribution to and responsibility for the
benefits awarded.
ORDER
Reasonable attorney fees from past-due benefits representing
20 percent of the veteran's compensation award or $42,857.80
are granted pursuant to the attorney fee agreement between
the veteran and his former attorney, and subject to the
provisions governing the award of monetary benefits.
_________________________________________________
S. L. Kennedy
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs